Thursday, November 15, 2012

Crisis ahead

Updated with document link below.
I just read an intriguing report of a symposium on "The Debt Crisis in the Legal Profession." Here are some notable excerpts:

"[A] time of true crisis in the legal profession may be just ahead. Data . . . indicate that law graduates are defaulting on their educational debts in disproportionately high numbers, and, according to the responses generated by financial aid and admission professionals during the Symposium, the debt/default phenomenon could have a dire outcome unless the entire legal community comes together in an effort to resolve it."

"[Data show that many graduates are leaving school with law school debt that exceeds the median starting salary for new lawyers] and will be faced with the possibility of allocating nearly 20 percent of [their] net monthly income to debt repayment."

"[Even higher debt loads] are relatively common among today's law graduates, yet, at the same time, NALP's data show that the prevalence of full-time legal and private practice jobs has been in sharp decline over the past four to five years, and compensation for entry-level attorneys has remained relatively flat . . . ."

"The evidence offered by the Symposium participants suggests that educational debt has a tremendous impact on graduates. At the least, it appears that debt dictates the types of jobs new lawyers can consider after graduation, assuming their desire to sustain good credit and repay their loans."

"Given the constrained legal job market, debt simply adds to the incredible stress and anxiety law students experience--particularly when these new would-be professionals realize the true implications of the job-salary-debt equation. Moreover, debt has an insidious way of precipitating frustration and anger in graduates--who may focus their emotions on themselves, their law school, or the profession in general. . . ."

"Within the law school community, there are voices suggesting that employers can help solve the debt/default problem by simply increasing entry-level salaries. Symposium attendees agreed that such a short-sighted solution would likely have only one long-term effect--further exacerbation of an already tight job market as 'fewer hires get paid slightly more.'"

". . . There was strong agreement among all Symposium participants that the pressure is now on law schools to take action to ameliorate the crisis. Possible responses include: increase the consumer information provided to pre-law and entering students; limit or decrease class sizes; increase the intensity of entrance counseling regarding debt; funnel additional resources into loan repayment and loan forgiveness programs; increase the amount and availability of grants and scholarships; and stop the escalation of tuition costs."

"The dichotomous data on the profession was disturbing to Symposium participants. When they recounted the facts--full-time legal and private practice jobs have been in steady decline, salaries have plateaued, graduate numbers are at the highest level . . . , and default rates of attorneys are the highest among all professional groups--they agreed that this may well be the early stages of a crisis of considerable proportion."

"Additionally, participants noted the impact of these events on the media and public, who cynically allege that 'there are too many lawyers,' espouse distrust of the profession, pose the possibility that a significant number of attorneys may be underemployed, and report that a large cadre of law school alums are disenfranchised from the profession and from their law schools. . . ."

"NALP employer members suggest that law graduates who can 'hit the ground running' are and will continue to be in great demand. Therefore, NALP and its members can continue the effort to support the development of 'gapless curricula' which will help provide graduates with essential skills and knowledge that will allow them to compete with laterals and technological innovations that have constrained the entry-level market. . . ."

"The concluding remarks of the Symposium revealed that the debt crisis cannot be averted: it is already upon the profession. However, there was agreement that it can be ameliorated somewhat if all stakeholders, including students, law school deans and faculty, lenders, admission and financial aid professionals, legal employers, and law-related or affiliated organizations work together toward solutions."

This symposium occurred in October 1995. You can read the report here.

The quotes come from an article published in the November 1995 NALP Bulletin. I found the article in hard copy, but will try to scan and post the full article tomorrow (unless some intrepid commenters can find it online first).

OT: Would it be possible to have a post on how much harder C and F is for lawyers versus other professions and how that limits access to work? For example, MDs/DOs don't have their credit scrutinized thoroughly just to get a license to prescribe controlled substances. Yet, we are seeing JDs being held up or outright denied for poor finances.

And what good they had it in 1995. I graduated 5 years later and felt very fortunate to get a job. Now I say fuck em all--the students, the debtors, the schools, and the government for extending infinite loans. The other day I got a message from my school about how USNWR takes into account the percentage of alumni that contribute in devising its rankings. Fuck them too.

Lawprof: this is off topic but it seems the school called Southwestern charges part time students who transfer into the full time program for 4 years of tuition, even though it only takes 3.5 years. You have to pay for a whole semester when you take no classes.

The law schools have no incentive to control costs. Nothing changes if they are not forced by the government to control costs.

The law schools have no incentive to reduce enrollment. Enrollment will not decline in any material way if the government does not force the law schools to reduce enrollment, either directly or indirectly by cutting off the funding spigot.

When I called my alma mater, Columbia Law School, a year or so ago to complain about the shocking excessive number of 90 transfer students they had accepting in a recent year, guess who answered the phone? The CHIEF OF STAFF TO THE DEAN. Who ever heard of having a Chief of Staff the Dean? The Dean is now the President of a major organization that needs to beef up on administrative staff? What gives here?

She told me her husband is a partner at a major law firm, so I surmised that she too might be a lawyer. I also surmised she might be highly paid.

Guess what the CHIEF OF STAFF TO THE DEAN told me? "Do you have ten million dollars?" That is the shortfall Columbia Law School needs to make up every year. "That is why we need to take 90 transfers."

For God sakes, many people in my Columbia Law class are not working. They were long ago replaced by younger lawyers as part of the "up or out" system. Many of my classmates cannot get a legal job of any type in the private sector that pays what a New York City school teacher of similar years of experience pays despite their strong academic records.

However, Columbia needs to pump out 450 or so JDs each year to meet their totally bloated expenses. In 2012, Columbia granted degrees to 700 JD and LLM students.

700 law degrees from Columbia alone? There is no need for all of these lawyers. To the extent they get jobs, they push more experienced Columbia JDs out of those jobs. There are not enough legal jobs for all of those JDs.

Even if Columbia Law grad get BigLaw jobs, these jobs are mostly short-lived. In house jobs are in short supply and often relatively unstable. In house jobs cannot be counted on to last for a career and usually do not last for a career. After a few years in BigLaw, a good portion of these Columbia lawyers will not be able to earn enough money to justify the high cost of attending Columbia Law.

"When I called my alma mater, Columbia Law School, a year or so ago to complain about the shocking excessive number of 90 transfer students they had accepting in a recent year, guess who answered the phone?"

"For God sakes, many people in my Columbia Law class are not working. They were long ago replaced by younger lawyers as part of the "up or out" system."

why are u calling to complain about the transfer students AFTER you graduated?

12:54 To answer your question, Columbia's taking 90 transfers is a fraud not only on the people who were admitted to that class as a 0L. It is a fraud on my Columbia Law classmates because we went through a much smaller and more selective school. When the school starts taking 90 transfers who had lower academic standing before they started, it is devaluing the Columbia Law degree. It is not that hard to get a Columbia Law degree now. With the transfer game in place, Columbia Law degrees are a dime a dozen in New York. They will not give you an edge in the job market because employers know now that Columbia Law is not necessarily that selective. A Columbia Law degree is caveat emptor for the employer.

The other BIG PROBLEM is that Columbia lawyers in New York particularly age out of their jobs - FAST The new classes of graduates take those jobs. If you are a Columbia grad seeking employment and there are simply hundreds of other Columbia grads on the market, it decreases your chances of working.

There is a big element of Columbia Law competing with lower ranked schools in New York. Many lower ranked school grads are haves and Columbia grads have nots.

In this impossible job environment for lawyers, having Columbia Law pack the class with less qualified transfers and having huge numbers of grads pouring out of the school, is incredibly galling for those of us who are part of Columbia Law School classes where substantial numbers of people have NO EMPLOYMENT OPPORTUNITIES IN THE PRIVATE SECTOR. We are talking about economic survival here, and Columbia Law's packing its classes with transfers decreases my classmates' chances of survival.

My God you sound so much like i imagine some of my former CLS classmates would sound on an anonymous message board. That is, pathetic. Columbia is indeed a dirty institution in many ways, but you are perhaps worse: an entitled middle-aged bald man howling @ the moon because not every one of your lazy pals from law school is a millionaire. I fully acknowledge the possibility that I may be pushed out of my job in a couple of years; at least I got it and have the opportunity to pay off my debt. That's more than many deserving law grads can say...

8:24 We are not talking about people not being millionaires. We are talking about a degree that does not enable a substantial percentage of the law school class to find any type of legal work in the private sector after several years. We are talking about many experienced Columbia grads, year after year, who cannot find legal jobs. We are also talking about a law school that claims placement rates well over 90% and that Law School Transparency rates at 93% in placement for first years.

Problem is that these placement numbers do not stick long-term. That is a very significant factor for people entering this profession and people who are in the profession but may have other employment options to know.

If the placement rate is 70% 20 years out and drops to 45% by 30 years, the law school is selling a degree that does not offer a meaningful career to a majority of its graduates. A career is optimally 40 years long.

You can poo poo this and talk about middle aged bald men howling or say that no law school guarantees a future.

Problem is that on the whole, statistically, a Columbia Law degree may not be a degree offering a career for the majority of the class. The average career may last say 27 years, when people need to work 40 years to retire. We need more numbers to be sure of how long these careers last on average.

The length of the career available to Columbia Law School graduates is very significant to anyone who is considering paying $250,000 or more for this degree.

If other careers offer a much better chance at a 40-year career and even Columbia, with top placement rates offers 27 years on average, that suggests that even fewer people than are placed first year in jobs should be going to law school. It suggests that there is huge oversupply of top law school grads with good experience who are surplus labor in the legal profession after several years of work.

I am howling at a law school that has dramatically hurt both its students and alumni by jacking up costs sky high, bloating enrollment and flooding the market with its grads. I am also howling because top schools like Columbia are not required to disclose ongoing placement information for more experienced grads. Right now, from what I see, Columbia Law School grads, at least many that I know, and grads of similar top schools, are stuck with fractions of a career. A big part of the problem is their flooding the marketplace with new lawyers. A second part of the problem is not acknowledging the huge supply demand imbalance in the job market for experienced graduates of top law schools. The experienced job market needs to be addressed and needs to be fixed, just as the entry level job situation needs to be fixed. However, the experienced job market is right now in the same position that the first year market for lawyers was a few years ago. It is the person's own fault, there is something wrong with them if they are not successfully gainfully employed. In fact, there are probably 166 lawyers for every 100 legal jobs in the experienced job market, based on ABA statistics, and there you have the problem.

I am looking at Leiter's post about there being no employment crisis and criticizing DJM. He is out in left field. Even from Chicago, the first year employment statistics reveal too many have nots. Move on to the experienced statistics for Chicago, and it will be apparent that many grads have suffered a bloodbath. Leiter wants to keep his head in the sand. If he really believes there is no employment crisis in the legal profession, why doesn't he call for a survey of the experienced grads of the T14 schools to prove it?

Most of the attention on this site is understandably focused on the students who don't get jobs. But I wonder what the impacts of these debt levels are on even the people who do get jobs and might not even have debt. Do employment conditions, for example, deteriorate if most people are not financially capable of leaving a job?

Although its largely forgotten now, there was a bad legal recession in he early 1990's. As a 1993 grad, I experienced it first hand. Then the tech-boom came along and things got better (although it was never as good as some imagine). Looking back at those days, law schools should have taken it as a warning and exercised caution. But they didn't. They cranked it up to 11 - more law schools, bigger classes, higher tuition etc ... Now we are back to where we were then, only its ten times worse.

To answer the commenter at 6:51, people generally do not leave BigLaw voluntarily without jobs. A few people retire, but not a lot.

There are so few post-BigLaw jobs to go to today that there is a traffic jam at BigLaw of associates who are stranded. There are hundreds of applicants for each ongoing job that will employ those lawyers who are thrust out of BigLaw. Managers of in house lawyers are wise to the fact that lawyers with great records coming out of BigLaw are a dime a dozen. These lawyers can be and are squished like ants for the manager's jollies. There is an unlimited supply of replacements from where these ants came from.

So the long and short of it is that for many law grads - do not count on a career working as a lawyer after BigLaw. Even if you get a job, you may be driving for three hours a day or living in a different city from your family in order to work. See how long that lasts before you collapse from fatigue.

Do not count on being anything but a solo after age 45. Do not count on any job lasting long-term. Save money for eventual and inevitable unemployment.

The pressure is on. The effect of much too many lawyers and much too many short-term jobs that only lawyers who are a few years out of law school meet the qualifications for (clerkships, associate positions, temporary government jobs) is a traffic jam. At the other end, if anyone gets a legal job with good pay and a good working environment that is actually stable (these jobs are the minority today), count on them to stay until old old age.

These law schools are like that old Lucy bit where she is wrapping the candies and they keep speeding up the assembly line until the candies are hiding in her hat and falling on the floor....only lawyers are the candies.

"Do not count on being anything but a solo after age 45. Do not count on any job lasting long term."

You are totally correct. The prospects for secure long term employment as a lawyer are non existent. Your comment should be included with every application packet received by any law student, and pasted on every bulletin board in every law school.

I wish I understood all this when I first applied to law school. If I could hit the reset button I would not have gone to law school, but at least I have a low student loan payment (<200 bucks per month) and no spouse/kids to support so I guess it could be a lot worse.

Seems we have been found by the spam-bots. Re: DJM's post, all I can say is thankfully they recognized this back in '95, just imagine what things would be like if tuition and class size had continued to its upward spiral.

"I don't think about the "supply" of legal jobs. I think about the demand for legal services."

Well, the demand for the legal services of New York Law School grads appears to top out at around 35% of the current crop of students, a slightly worse than 1 in 3 chance that any of them will actually get to be lawyers.

"Flood the market with highly skilled graduates and we'd expect the number of employed lawyers to rise but their salaries to drop."

So the expectation is that flooding the market will drop salaries, yet your school charges $47,800/year?

Sounds like too little, too late:"We want a long-term, endowed, sustainable program," she said. "When we reach our $10 million goal, we will be able to fund 12 graduates from each graduating class with $6,500 a year for five years in a row."

So for 5 years, the school is going to give you a whopping $550 a month. That will certainly take the sting out of those $2,200/month payments (per LST site estimate) you will be making on your paltry PI salary. Of course, your loans won't actually be forgiven until you are ten years out, so I guess you are on your own for those last 5 yeas.

For anyone wanting to help develop a law school death watch list try suggest visiting that always handy resource, Wikipedia, where there is a hyperlinked list of law schools in the United States, by State, as well as proposed new schools (3 extra in New York, whoa!)

http://en.wikipedia.org/wiki/List_of_law_schools_in_the_United_States

In many states what is shocking is how many schools there are(e.g., FL CA.)

Rather than having multiple lists for a state, if you have changes copy earlier posts and put in your changes – and then post the changes too.

Here are some general criteria from my original quick and dirty list. If you can think of more suggest them, or assail any of mine you think is wrong.

With your assessment set out the criteria noting which ones are school-specific and which are general. Please, make it sensible and clean – not “shithole” references, no ranting.

A few general criteria:

"turkey's voting for thanksgiving/christmas": stand alone law schools will usually close later unless they are "for profit" because the Dean and faculty would be voting for unemployment. Schools that are part of bigger schools are more vulnerable because the host institution can usually make the decision. But seesize own endowment; cash-in-hand, cash-flow.

value realized in closing: - can a parent school realize value by repurposing or selling facilities - so is the law school on or contiguous to a campus or the main campus? or is it in a nice downtown building? or is it in the middle of nowhere?

cash-flow, cash-in-hand look at the schools accounts (they will be available somewhere.) How much cash does the school have in hand at the end of each financial year. Most las schools have positive cash-flows twice a year, when the tuition is paid and go cash-flow negative after. If the school is borrowing in last summer and in say December, that indicates that there is a growing problem, tuition is not covering the bills.

size own endowment: - the school will blow through its endowment before closing, but look at the form of the endowment. Sometimes it is in non-liquid assets, say shares that are held in a trust instrument that means the donor gets to vote them and they cannot be sold – the school gets the usufruct, or property with rent rolls.

large 2012 tuition hikes: in the current environment a sign of financial desperation.

for profit school: (if the trend is to be short-medium term loss making investors will "pull the plug")

controversy: (see e.g., Tuoro)

recency: it has not been around long enough to build up wealth alumni and powerful friends

low ranking private: - especially with higher ranking schools in same metro - remember this is not just competition, it is about how a school closes. Another school in the same metro gives somewhere to transfer rising 2Ls and 3Ls.

public in state with multiple public law schools and low ranking this is a big one. In a state with multiple schools an easy solution is to close one or two and take the rising 2L and 3L and have them transfer to the retained state school.

"rats abandoning ship:" have a number of high profile professors jumped to other more stable schools recently - and for academics reading this - are you getting those vague "would there be an opening at your school" calls, conversations and e-mails (or even hints) from faculty at that school. This is usually sign that a law firm is collapsing, partners start calling around, I expect professors will be do the same.

I'm afraid the "scam deniers" will use this post as evidence that the challenges currently facing the legal profession are temporary - just as they were in 1995. The conditions reflected in the report ameliorated significantly in the boom of the late 90s. The challenge is to show that "this time it's different." The duration of the recent downturn isn't sufficient. (The protracted nature of the recovery from the financial crisis is no surprise to anyone, but no one believes it will last forever.) The key to me is the debt issue. Debt is the public element that has traction -- more so than unemployed lawyers, which, while devastating to many lawyers, does not elicit much sympathy. The message needs to be -- just as the federal debt is unsustainable, so is educational debt, and particularly law school debt. And the consequences are both personal (indentured servitude) and political (huge numbers of people unable to repay loans that are guaranteed by the federal government.)

I know the debt issue has been a major focus of this blog. But there are numerous other threads that I think blur the focus. Yes-- there are not enough jobs. Yes-- law school should be two years. Yes -- there should be more practical training. Yes -- the law schools should provide more accurate data. But the broader population doesn't care about these things. They will care when this becomes a human story -- of people suffering under crushing debt that they cannot ever repay. And they care when it becomes a moral issue -- of government subsidizing the misery .

For one, that recession was much shorter, and its impact on the legal marketplace was felt only for two or three years before returning to pre-recession levels. We just passed the fourth year of decline with the class of 2011, and nothing about the class of 2012 that we know suggests it will be much changed for them.

For another, we know a lot more about the character of post-graduation employment than we did before. We know that even the embarrassingly low percentage of 55% full-time/JD-required employment is padded with document review jobs that do not lead to stable positions with the firms offering those jobs, and with schools offering subsistence payments to JDs providing pro bono legal services up to 12 months after graduation. NALP's breakout goes deeper now than it did in 1995, and the results do not flatter law schools.

Third, law school tuition has doubled or tripled on average since 1995. BigLaw may have kept pace, but the salaries of the non-BigLaw folks have not, if only because the average household income in America has remained essentially flat for 20 years. There are fewer things that you can do as alternatives to a law career that allow you to enjoy a middle-class lifestyle and pay your debts, although I imagine that JDs will flood government jobs of all kinds in order to capitalize on the 10-year forgiveness aspect of IBR.

Lastly and perhaps most importantly, the Internet is part of the American public consciousness today in a way that it wasn't then. With so many voices online telling prospective students not to go, or not to accept stipulations on scholarships if they do, or to take the lowest-cost non-HYS school they can find, it will be hard for law schools to maintain the sucker margin they need to continue operations as they presently are. Absent an improbable recovery of the legal services market, the only way that law school incomes can go is down.

11:21 PM here. Thanks much for the reply. I worry about job stability too. I mean, I've seen many former colleagues in the age 45-55 range get caught in a "reduction" and take a long, long time to get a new job (if they did). I'm not any "specialer" than they are, so if I got dumped tomorrow I have no clue where I'd land...

So, next question - if you hadn't gone to the COL, what would you have done instead?

http://www.huffingtonpost.com/mobileweb/2012/09/16/chicago-teachers-strike_n_1888804.html (for those of you that think you cant or dont want to do manual labor)

I know what people are going to say: its hard to get those jobs to. I contend that for people that can get into LS and are in average physical condition, that is not the case (note that I believe the fireman's test asks you if you know the nature of a screwdriver, i.e. how do you use one). Even if thats the case though, better to try to get those type of jobs for 8 years (or four for the ones that a four year degree is required), than trying to win the LS lottery.

No one cares what happens to educated professionals generally, and lawyers especially. Both political parties get points for condemning people like that. However, at least one political party gets points for protecting municipal workers. So do the humble, smart and wise thing: forget about childhood fantasies about Law and Order like jobs and get a job with security and political protection.

We cant save the people who were scammed, its politically too beneficial for them to suffer. Law schools arent going to shut down, there are always going to be more than enough lemmings to fill the seats and feed the scam. We can save alot of smart and ambitious kids who have the humility to process the truth. We can show them the way to get solid, politically protected, and non-soul crushing employment in a manner that does not involve accumulating 300k of non-dischargeable debt. Even if they fail, the punishment will be less than that of going to LS.

No, this supports the anit-scammers point that what we are seeing now is temporary and the problems will go away just like they did in 1995. There is a post above already anticipating this argument and responding to it.

The suggestions of the symposium were good however they discuss easing the financial burden going going to law school for future students. We need debt relief for the tens of thousands who graduated from law school and cannot obtain either legal or non legal work. Debt relief needs to come in the form of BK discharge for PRIVATE educational debt, as was the case prior to 2005. In addition, IBR needs to lower the repayment period and income level to around 5-10%

Ain't going to happen. Didn't happen for homeowners. Won't happen for students. "Moral hazard," as Obama says. Only the Big Banks get the bailouts. If you think there will ever be political sympathy for English majors who doubled down on student loan debt, you are dreaming.

Saying IBR needs to lower the repayment period and income level is ridiculous. You need to take some personal responsibility. the government is covering all of your government loan payments except 10% of your income, something you should be grateful for. Its entirely reasonable to expect you to contribute that to debt you incurred. If you tell me you can't afford it, I'd like to know if you have cable tv, a smartphone or other luxuries you could give up to repay the debt you chose to incur.

I would add a few other criteria, that are perhaps already covered in general on your list, but that perhaps need to be delineated specifically.

1) Likelihood of grads getting employed. (see Law School Transparency) Low employment numbers mean unhappy grads who will flood the Internet w/ negative messages about the school, which brings me to #2:

2) Numbers of unhappy grads who publicize negative messages about the school. This could be a part of 'reputation' but I think it deserves its own category because reputation could be derived from ranking. This, however, is different. If a school has a good ranking/reputation according to US News (and I don't think US News ratings are really reflective of the schools) but hundreds of grads are on the Internet complaining about their retail job, this will definitely impact the school's survival. I know that deans don't really believe this as of now, but I have a feeling that in the future, they will begin to see how unhappy grads negatively affect their business.

After I initially left a comment I seem to have clicked on the -Notify me when new comments are added- checkbox and now every time a comment is added I recieve four emails with the exact same comment.There has to be an easy method you are able to remove me from that service?